The mechanisms that restrict proliferation and suppress de-differentiation of transit amplifying cells in adult stem cell lineages are unknown. Mature secondary neuroblasts in Drosophila larval brains resemble vertebrate transit amplifying cells, and undergo limited rounds of asymmetric divisions to regenerate and to produce terminally differentiated neurons. We identified a novel transcription factor Earmuff (Erm), which restricts proliferation and suppresses de-differentiation of mature secondary neuroblasts. In erm mutant brains, mature secondary neuroblasts de-differentiate back into their parental neuroblast fates resulting in a dramatic increase in type II neuroblasts. The physiological and functional properties of the de-differentiated neuroblasts are indistinguishable from the endogenous type II neuroblasts. The de-differentiation phenotype in erm mutant brains can be rescued by targeted expression of Erm or its mouse homologs in mature secondary neuroblasts. Intriguingly, de-differentiation of mature secondary neuroblasts in erm mutant brains occurs independently of cortical cell polarity. Our data suggest that Erm restricts proliferation by promoting Prospero-mediate cell cycle exit, but suppresses de-differentiation by negatively regulating Notch signaling. Our proposal outlined below will provide insight into the molecular mechanisms by which Erm restricts proliferation and suppresses de-differentiation of mature secondary neuroblasts.